Is the king of all beverages a good dividend stock? The ubiquitous Coca-Cola Company (NYSE: KO) shows stability and has locked in its position as one of the world's most recognizable brands. The products the company creates have created extreme customer loyalty over time.
But is it a good dividend stock? Let's take a look at the history of Coca-Cola, the reasons why it makes a good dividend stock and how to buy shares of the soft drink behemoth.
History of Coca-Cola Stock
How did Coca-Cola, one of the world's most famous beverage companies, get started?
The eventual behemoth started out with just product in 1886, in Atlanta, Georgia. Dr. John Stith Pemberton, a local pharmacist, produced the syrup for Coca-Cola. He took it to Jacobs' Pharmacy, paired it with carbonated water and sold it for five cents a glass. It sold a small number of drinks per day — just nine glasses.
Pemberton never realized the potential of his invention. He sold the Coca-Cola recipe to Asa Griggs Candler, an American business tycoon and politician, for just $238.98 in 1888. Candler founded The Coca-Cola Company in 1892. In 1919, a group of businessmen led by Ernest Woodruff purchased The Coca-Cola Company from Candler for $25 million. In that same year, Coca-Cola made its initial public offering (IPO) on the New York Stock Exchange (NYSE), for $40 per share.
Since then, the Coca-Cola Company has grown to include more than 3,800 brands across the world.
The Coca-Cola Company, still headquartered in Atlanta, manufactures and sells the following:
- Sparkling soft drinks
- Flavored and enhanced water
- Sports drinks
- Juice, dairy and plant-based beverages
- Tea and coffee
- Energy drinks
- Beverage concentrates and syrups
- Fountain syrups to fountain retailers
The company's brands include more than just Coca-Cola, Diet Coke/Coca-Cola Light and Coca-Cola Zero Sugar. Its brands also include Fanta, Fresca, Schweppes, Sprite, Aquarius, Ciel, Dasani, Ice Dew, Powerade, Minute Maid, Costa, FUZE TEA, Georgia and Gold Peak.
In the first quarter 2022, The Coca-Cola Company's net revenues grew 16% to $10.5 billion and organic revenues grew 18%. The company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages. Cash flow from operations was approximately $620 million, a decline of $1 billion versus the prior year. Free cash flow (non-GAAP) was approximately $400 million, a decline of $1 billion versus the prior year.
Over the first six months of 2022, shares of Coca-Cola have risen 6.3%, despite a market devastated by inflation and despite being hit hard by the pandemic, which shut down restaurants and other venues that carry its brands. By comparison, the S&P fell 20.5%, showing evidence of a brand able to ride out whatever storm that shows up in its path. In short, the Coca-Cola Company is a great dividend stock.
Reasons Coca-Cola (NYSE: KO) Makes a Good Dividend Stock
The most recent Coca-Cola Company dividend was 44 cents per common share, payable on July 1, 2022 to shareowners of record as of June 15, 2022. The quarterly dividend rose approximately 5% from 42 cents to 44 cents as of the last dividend increase.
Currently, Coca-Cola's stock price is at $62.74 as of this writing on July 7, 2022. It's also a Warren Buffett headliner — he first bought the stock in 1988 and it remains in his company's fourth-largest position.
Coca-Cola remains a member of the Dividend Aristocrats, which means it has increased its dividend for 60 consecutive years, a promising return for dividend investors.
You may wonder about whether market share will start to decline over time because of people's propensity to revert to healthier alternatives. However, Coca-Cola has initiated expansion into Africa and NARTD brands worldwide, despite declining sales of sugary drinks. As consumers continue to make healthier choices, Coca-Cola may start creating carbonated soft drinks without sugar.
How to Buy Coca-Cola Stock
Let's take a look at how to buy shares of the Coca-Cola Company if you're interested in investment returns.
Step 1: Pick a brokerage.
Do you have a brokerage account? If not, you'll need to choose the right brokerage for you. This may involve shopping around for reasonable commissions, few extra fees, low account minimums, an easy-to-use platform and features. Your choice of broker should reflect your investing style. Do you prefer to trade shares or like the idea of a buy-and-hold approach? Many dividend investors choose a buy-and-hold approach to reap the benefits of dividends over the long term. If your strategy involves taking a Buffett approach to dividend investing, you may want to choose a broker that is buy-and-hold friendly.
Step 2: Decide how many shares you want to purchase.
How much do you plan to invest? Your best bet is to put together a budget for the number of shares you want to buy and then invest accordingly. For example, if you have $1,000 you want to invest, start there instead of how many shares you want to own. Divide the $1,000 you have available to invest by the current share price of Coca-Cola. Your broker may allow you to buy fractional shares. This means you can buy partial shares.
Let's say that when you actually buy it, the stock price of The Coca-Cola Company is $60.10 and you want to buy $1,000 worth of shares. In this case, you can buy 16.64 shares of the stock.
Step 3: Choose your order type.
Your trading platform will give you several order types to choose from. The type of order you choose depends on your trading goals. For example, you may not want to use a certain order type when you intend to buy and hold your investment. You may want to choose a different order type when you intend to only trade your shares.
- Market order: A market order means your trade will occur at the available market price without a specified price limit. If you want it to occur immediately, a market order is the way to go. However, remember that a market order doesn't necessarily execute at the price you see. The prices can vary.
- Limit order: A limit order lets you specify the price at which you want to buy or sell. In other words, you have more control over the price. Your buy order will occur only at the limit price or a lower price. Same with a sell order. They are fulfilled at the limit price or higher.
- Stop order: A stop order is a type of market order to buy or sell a stock when the stock price moves over or below a specific price. This "specific price" is called the stop price. If it reaches the stop price, it becomes a market order and fills at the next available market price.
- Stop-limit order: A stop-limit order combines features of a stop and limit order. In this case, an order is executed at a specified price or better after a stop price is reached. Afterward, the stop-limit order becomes a limit order to buy or sell at the limit price or better.
- Stop-loss order: A stop-loss order can limit losses. You give instructions to sell your asset when the price drops to or below a pre-specified level.
A market order is the order type you may want to consider if you plan to invest in Coca-Cola for the long term, because you may not worry too much about getting a short-term "best price" for your investment.
Step 4: Execute your trade.
Once you've chosen your order type, you're ready to invest in The Coca-Cola Company. Navigate to your broker's ticker window and enter "KO." Next, enter in the number of shares you would like to purchase.
Learn more: What are Dividend Stocks? Plus, Dividend Stocks Examples
Is Coca-Cola a Good Dividend Stock?
Yes, The Coca-Cola Company is a good dividend stock and will likely grow over the coming years. The Coca-Cola Company was able to gain stakeholders, and consumers and emerge stronger throughout the duration of the pandemic through revenues, earnings and cash generation — a good sign for future investors.
Companies Mentioned in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Coca-Cola (KO)||$61.16||+1.9%||3.01%||26.82||Moderate Buy||$67.80|